Blow for Tesco as star investing guru Neil Woodford sells last of his shares in supermarket giant

Star fund manager Neil Woodford has revealed he has ditched the last of his Tesco shares.

The move comes as a blow for the giant retailer, which has been buffeted by bad news in recent months, ahead of its results later this week.

Woodford, manager of two giant income funds at Invesco Perpetual, is regarded as one of the UK's best stock-pickers following long spells of making the right calls.

Investing star: Neil Woodford is manager of two giant income funds at Invesco Perpetual

He sold most of his Tesco holding,
which made up 3.5 per cent of one of his funds, earlier this year but
writing in the Telegraph he has now admitted ditching the last of his
shares - and explained his rationale.

'I have held Tesco shares in my funds for most of the past 20 years,
during which time it has proved to be a very successful long-term
investment,' Woodford wrote.

'But I now find myself worrying more than
ever about the risks – both macro-economic and business specific risks –
that this investment now entails.

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'Tesco is undoubtedly a cheap asset
and I am always loath to sell at depressed valuations, but I am
confronted with other investment opportunities which are as cheap but
which do not, in my opinion, face the same level of risk. Consequently, I
have, in recent days, sold my entire holding of Tesco shares.

'Tesco remains a great British business with many attractive features
and strengths. From an investment perspective, however, there is always
an intense competition for capital in my portfolios and I am more
convinced about investment opportunities elsewhere.

'To my mind, Tesco
needs to become a more cash generative, less capital intensive business.
In short, it needs to demonstrate it has become a business more focused
on shareholder returns.'

Tesco: The supermarket giant issued a profit warning earlier this year

Woodford said
Tesco was putting its house in order to fix some structural problems
but added that 'the history of UK retailing shows that it can take a
long time for a business to solve structural issues and get back on
track'.

He added: 'The proceeds of my Tesco
move were reinvested in a broad range of existing core holdings,
including a very small amount in Wm Morrison, which, like the rest of
the sector, sold off in sympathy following Tesco's disappointing trading
update...

'Elsewhere, it is fair to say that
the rest of the proceeds have been recycled into businesses that are
less cyclical in nature, therefore the overall economic sensitivity of
the portfolio has been reduced still further.'

Tesco shares nose-dived earlier this year when the company stunned investors with the first profit warning in 20 years.